Correlation Between GM and The Tocqueville
Can any of the company-specific risk be diversified away by investing in both GM and The Tocqueville at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining GM and The Tocqueville into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and The Tocqueville Fund, you can compare the effects of market volatilities on GM and The Tocqueville and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in GM with a short position of The Tocqueville. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and The Tocqueville.
Diversification Opportunities for GM and The Tocqueville
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and The is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and The Tocqueville Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Tocqueville and GM is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on General Motors are associated (or correlated) with The Tocqueville. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Tocqueville has no effect on the direction of GM i.e., GM and The Tocqueville go up and down completely randomly.
Pair Corralation between GM and The Tocqueville
Allowing for the 90-day total investment horizon GM is expected to generate 1.32 times less return on investment than The Tocqueville. In addition to that, GM is 3.58 times more volatile than The Tocqueville Fund. It trades about 0.07 of its total potential returns per unit of risk. The Tocqueville Fund is currently generating about 0.35 per unit of volatility. If you would invest 4,989 in The Tocqueville Fund on August 29, 2024 and sell it today you would earn a total of 316.00 from holding The Tocqueville Fund or generate 6.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. The Tocqueville Fund
Performance |
| Timeline |
| General Motors |
| The Tocqueville |
GM and The Tocqueville Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and The Tocqueville
The main advantage of trading using opposite GM and The Tocqueville positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, The Tocqueville can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in The Tocqueville will offset losses from the drop in The Tocqueville's long position.The idea behind General Motors and The Tocqueville Fund pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| The Tocqueville vs. Equity Series Class | The Tocqueville vs. Large Cap Fund | The Tocqueville vs. The Tocqueville International | The Tocqueville vs. Heartland Value Plus |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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